Pursuant to the accord reached
between Iran and the P5+1 in July 2015 regarding Iran's nuclear
program, the International Atomic Energy Agency (IAEA) has verified
that Iran has fulfilled its nuclear obligations, and the United
States and the European Union (EU) implemented wide-ranging
sanctions relief for Iran effective Jan. 16, 2016.

While the core U.S. sanctions
prohibiting U.S. persons from engaging in most transactions with
Iran remain in place, most extraterritorial sanctions involving
non-U.S. persons engaged in Iran-related activity have been lifted.
Non-U.S. entities owned and controlled by U.S. entities will be
permitted to engage in most Iran-related activities

A new favorable licensing policy will
allow the sale/lease of civil passenger aircraft to most Iranian
airlines

Iranian foodstuffs and carpets can
now be imported into the United States.

Jan. 16, 2016, marked a significant milestone
("Implementation Day") as the International Atomic Energy
Agency (IAEA) verified that Iran had fulfilled its nuclear-related
obligations under the landmark Joint Comprehensive Plan of Action
(JCPOA) entered into by Iran, the P5+1 (United States, Russia,
China, United Kingdom, France and Germany) and the European Union
(EU) in July 2015. Simultaneously with the IAEA's
pronouncement, the United States and the EU implemented limited but
significant sanctions relief as set forth in the JCPOA.

In general, the United States is lifting most secondary
(sometimes referred to as "extraterritorial") sanctions
on Iran. These measures – which targeted non-U.S. persons
engaged in activity without a U.S. nexus – affected
Iran's energy, maritime, automotive and financial sectors, and
resulted in significant pressure on the Iranian economy as many
non-U.S. companies and firms ceased, or significantly curtailed,
commercial activities with Iran and Iranian persons. However, the
core U.S. trade sanctions that prohibit U.S. persons from engaging
in most commercial transactions with Iran remain in place, though
with important exceptions discussed below.

The changes to U.S. sanctions regarding Iran involve a very
complex set of executive orders, waivers, general licenses and
other actions by President Obama, the U.S. Department of State and
the U.S. Treasury Department Office of Foreign Assets Control
(OFAC). We provide a summary of these changes below.

U.S. Secondary Sanctions Relief

The most significant aspect of Implementation Day is the removal
of most U.S. secondary sanctions on Iran. Non-U.S. persons (not
owned or controlled by U.S. persons) will no longer be subject to
U.S. sanctions for engaging in a wide range of activities with
Iran. In particular, the United States will lift sanctions on the
following activities and sectors:

purchase, subscription or
facilitation of the issuance of Iranian sovereign debt

provision of U.S. banknotes to the
government of Iran

trade in gold and other precious
metals with Iran

trade in graphite and raw or
semi-finished metals such as aluminum, steel, and coal with
Iran

provision of software for integrating
industrial processes to Iran

Iran's automotive industry

Removal of SDN Designations

The United States also is removing more than 400 individuals and
entities from the OFAC's Specially Designated Nationals (SDN)
list. This includes prominent Iranian firms and financial
institutions such as Iran Air, the Islamic Republic of Iran
Shipping Lines (IRISL), the National Iranian Oil Company and the
National Iranian Tanker Company.

Impact for U.S. Persons

Although the restrictions for U.S. persons remain largely in
place – including restrictions on U.S. banks processing
transactions, unless such transactions are licensed by OFAC –
there are several important changes that will significantly affect
U.S. companies and individuals:

Commercial Passenger
Aviation. U.S. persons may now seek specific licenses
from OFAC (operating under a "favorable licensing
policy") to export and re-export commercial passenger aircraft
to Iran. This is a significant change to U.S. government policy and
is substantially broader than the limited relief previously
available under the interim JCPOA, which only authorized specific
licenses for parts and repair services necessary for safety of
flight of existing Iranian aircraft.

Import of Iranian Carpets
and Foodstuffs. This new exception utilizes
substantially the same language and permits importation from Iran,
directly or indirectly, of foodstuffs "intended for human
consumption."

General License for U.S.-Owned or Controlled Foreign
Entities

Prior to October 2012, foreign subsidiaries of U.S. companies
were not generally subject to the U.S. sanctions applicable to U.S.
persons. However, in 2012, U.S. sanctions went into effect that
subjected entities "owned or controlled" by U.S. persons
to the same restrictions as U.S. persons. On Jan. 16, 2016, OFAC
issued a general license that rolls back those restrictions and now
generally allows foreign subsidiaries of U.S. companies to engage
in transactions with Iran. In particular:

This general license authorizes a
U.S.-owned or controlled foreign entity to engage in most
transactions, directly or indirectly, with the Government of Iran
or any Iranian entities.

U.S. foreign subsidiaries are still
prohibited from exporting, directly or indirectly, any goods,
technology, or services from the United States to Iran, with
limited exceptions such as food, medicine, and medical equipment
under general license.

Unless otherwise licensed, U.S.
foreign subsidiaries may not transfer funds to, from or through a
U.S. depository institution in connection with an Iran-related
transaction.

U.S. foreign subsidiaries cannot
engage in transactions with SDNs, the Iranian military or law
enforcement agencies.

While a U.S. parent company cannot generally facilitate
transactions by the foreign subsidiary with Iran, the general
license authorized the U.S. parent to engage in activities related
to the "establishment or alteration of operating policies and
procedures" of the U.S. parent or foreign subsidiary necessary
for the foreign subsidiary to begin Iran-related activity, as well
as allowing the U.S. parent to make available to its foreign
subsidiary automated and globally integrated computer, accounting,
email, telecommunications or other business support systems in
connection with the foreign subsidiary's Iran-related
activities.

Remaining U.S. Sanctions and Challenges

Despite the generally positive developments of Implementation
Day, U.S. and foreign firms and individuals interested in exploring
Iran-related opportunities must use caution and remain cognizant of
remaining sanctions and other restrictions:

The JCPOA is not a treaty or
otherwise enforceable international agreement. Both the Iran and
the United States have acknowledged that it is a set of
"political commitments" not binding under international
law. Therefore, the changes brought about by Implementation Day may
be subject to sudden and unforeseen political and diplomatic
developments, and the U.S. government has made clear that it will
reimpose sanctions if Iran violates any of its commitments. In fact
the JCPOA itself has "snap-back" provisions that would
allow the U.S. to reimpose sanctions if Iran fails to meet its
commitments.

Sanctions relief does not extend to
so-called "U-turn transactions." U.S. financial
institutions may not be involved in any non-exempt
or non-licensed Iran-related transactions (including U.S.-dollar
clearing transactions). This restriction severely restricts
U.S.-dollar transactions involving Iran by third-country
entities.

A number of Iranian firms and
individuals remain on the SDN list and subject to U.S. secondary
sanctions, including the Islamic Revolutionary Guard Corps (IRGC).
Given the IRGC's considerable, but opaque, involvement in the
Iranian economy, it is critical for all persons seeking to engage
in business in Iran to exercise due diligence.

Certain Iranian government-owned
entities, while removed from the SDN list, are still subject to
"blocking" by U.S. persons.

Given that Iran has been more or less
off limits for so many years, transactions may be restricted by
sanctions clauses imposed under financing or other counter-party
agreements.

U.S. public companies will likely
still be required to report activities related to Iran.

Holland & Knight attorneys have deep experience in
counseling both U.S. and foreign firms and individuals on
navigating the complex terrain of Iran sanctions. Additionally,
they have worked closely with relevant government agencies in both
obtaining necessary licenses and assisting clients in enforcement
actions.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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U.S. Customs and Border Protection recently announced that it will block imports of goods that were produced with North Korean labor even though North Korean workers were employed outside of North Korea.

The U.S. Department of the Treasury Office of Foreign Assets Control ("OFAC") issued amended Directives and frequently asked questions ("FAQs") in connection with the Ukraine/Russia-related sanctions program.

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